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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
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This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






2. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






3. Ed = 1






4. The marginal utility from consumption of more and more of that item falls over time






5. Ei = (%dQd good X)/(%d Income)






6. Models where firms agree to mutually improve their situation






7. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






8. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






9. Models where firms are competitive rivals seeking to gain at the expense of their rivals






10. Costs that change with the level of output. If output is zero - so are TVCs.






11. The rational decision maker chooses an action if MB = MC






12. Entry of new firms shifts the cost curves for all firms upward






13. The price of a good measured in units of currency






14. Ei > 1






15. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






16. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






17. The change in quantity demanded resulting from a change in the price of one good relative to other goods






18. AVC = TVC/Q






19. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






20. Entry of new firms shifts the cost curves for all firms downward






21. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






22. Ed = 0 - no response to price change






23. Ed = 8 - infinite change in demand to price change






24. ATC = TC/Q = AFC + AVC






25. Total product divided by labor employed. APL = TPL/L






26. The imbalance between limited productive resources and unlimited human wants






27. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






28. AFC = TFC/Q






29. The additional cost incurred from the consumption of the next unit of a good or a service






30. Exists at the point where the quantity supplied equals the quantity demanded






31. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






32. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






33. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






34. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






35. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






36. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






37. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






38. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






39. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax






40. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






41. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






42. The total quantity - or total output of a good produced at each quantity of labor employed






43. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






44. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






45. Exists if a producer can produce more of a good than all other producers






46. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand






47. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






48. Ed > 1 - meaning consumers are price sensitive






49. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






50. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital